Australians are rushing to access their superannuation early amid the COVID-19 pandemic but there’s a key risk of doing this that few would be aware of.

The latest data showed that 2.4 million Aussies have applied to withdraw $25 billion from their nest egg, reported the Australian Broadcasting Corporation.

But before you join the frenzy, you should be aware that this could impact on your ability to get a new home loan or refinance an existing mortgage.

Banks’ dim view

I was told by a mortgage broker contact that lenders are likely to reject applications from those that have tapped into this support scheme as they are deemed to be under financial hardship.

That’s fair enough because you need to declare that you are facing financial stress in the first place before you can get approved by the tax office.

From what I understand, Commonwealth Bank of Australia (ASX: CBA) is the strictest and it’s rejecting just about anyone that have tapped into their super.

The other lenders like Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) are heavily scrutinising such applicants.

Feeding the housing downturn

You would think that those forced to gain early access to super won’t be apply for housing loans, but this isn’t the case. The mortgage broker I chatted with said many of their clients (usually first home buyers) have done this and were shocked to find they can’t get a loan now.

This coincides with the latest ABS data that showed new loan commitments plunged a seasonally-adjusted 11.6% in May. This is the biggest monthly decline on record and these factors don’t bode well for house prices.

Meanwhile, many looking to refinance to a lower rate and to capitalise on the generous cash back given by the big four have also been caught out.

3 dangers from accessing your super early

It appears that many Aussies are applying for the early super release even though they don’t really need the cash.

The ATO recently issued warnings that they are coming after those who have abused the program, which allows you to withdraw $10,000 in FY20 and another $10,000 in FY21 tax free.

Early indications are many Aussies have filed for the second tranche since the start of this financial year on July 1.

Now there are three reasons why you should only apply for early super payouts only if you really need it. Taking money out now will leave you significantly poorer when you retire, you can get in trouble with the tax man if you treat this as free money and you can hurt your chances of getting a bank loan.

Foolish takeaway

However, this assumes the banks find out about it. Getting access to super won’t show up on your credit report. So, the only way for lenders to know is if the applicant is required to show bank statements and the super withdrawal shows up.

Another support program with a hidden sting in the tail is the loan holiday scheme offered by lenders.

Borrowers can apply to suspend mortgage repayments till October and the banks are offering a further four-month extension for qualified customers.

But if you are on a repayment freeze, you won’t get refinanced as you are also deemed to be under financial stress.

Lenders are particularly sensitive to living up to their responsible lending obligations these days, thanks to the Banking Royal Commission.

As the adage goes, nothing comes for free.

More reading

• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• The embattled ASX 200 stocks that could deliver a dividend surprise
• 3 large cap ASX shares primed for expansion and M&A activity
• 3 ASX dividend shares to buy in July
• The CBA share price is up 30% since March

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. Connect with me on Twitter @brenalu.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to end the week in the red. At the time of writing the benchmark index is down 0.25% to 5,940.4 points.

Four shares that have fallen more than most today are listed below. Here’s why they are dropping lower:

The AVITA Therapeutics Inc (ASX: AVH) share price is down almost 3% to $8.29. This follows the release of the regenerative medicine company’s fourth quarter and full year sales update. For the 12 months, AVITA’s total revenue was approximately US$14.32 million. This was an increase of US$8.78 million or 160% over FY 2019’s sales. It appears as though investors were expecting even stronger growth.

The Chorus Ltd (ASX: CNU) share price has crashed 9% lower to $6.65. Investors have been selling the New Zealand telco’s shares after the release of its fourth quarter update. That update revealed that the lockdown period had a significant impact on its fourth quarter fibre activity and uptake. In addition to this, the New Zealand Commerce Commission has announced a change to the timing for the next step in its input methodologies process. This relates to changes they are considering to their approach to valuing the financial loss asset and associated updates to the draft determination provisions.

The Evolution Mining Ltd (ASX: EVN) share price is down 3% to $6.12. Investors have been selling the gold miner’s shares after it was downgraded by two brokers. Both Goldman Sachs and Citi have downgraded Evolution’s shares to a sell rating largely on valuation grounds.

The New Hope Corporation Limited (ASX: NHC) share price has fallen 1.5% to $1.38. This is despite the coal miner announcing the appointment of its new chief executive officer this morning. New Hope has appointed former Yancoal Australia Ltd (ASX: YAL) CEO, Reinhold Schmidt, to the role. Mr Schmidt left the rival coal miner in March of this year.

More reading

• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• AVITA Therapeutics share price on watch after Q4 update
• 5 things to watch on the ASX 200 on Friday
• Why Afterpay, Evolution, Netwealth, & Praemium shares are racing higher
• Gold jumps to 9-year high with record highs in sight

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited. The Motley Fool Australia has recommended Avita Medical Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Marley Spoon AG (ASX: MMM) share price continued its miraculous performance yesterday and posted another record high after cracking the $2 mark. After surging another 11% in Thursday’s trading session, the Marley Spoon share price is up an astounding 889% from its lows in mid-March.

Here’s what’s fuelling the Marley Spoon share price and a closer look at whether you should invest.

What does Marley Spoon do?

Marley Spoon is the second largest, subscription-based meal-kit provider in Australia. The company delivers fresh ingredients to customers allowing them to produce easy meals at home. Marley Spoon currently operates in 3 primary regions: Australia, the United States and Europe.

In addition to reducing the hassle of grocery shopping, Marley Spoon also provides meal-kits that contain step-by-step recipes, allowing consumers to prepare healthy, pre-portioned meals.

What’s fuelling the Marley Spoon share price?

Marley Spoon experienced an unprecedented demand for its services during the coronavirus pandemic, as many consumers looked to bypass the chaos and panic buying at local supermarkets. In its most recent trading update, Marley Spoon reported a 46% increase in revenue for the first quarter and estimates that 7.5 million meals were delivered in the first quarter of 2020.

What is the outlook for Marley Spoon?

In a recent investor presentation, Marley Spoon reported lower customer acquisition costs and lower advertising rates, indicating strong retention and customer loyalty. If demand continues to remain elevated, the company predicts that its path to profitability will be accelerated. In order to make the most of the momentum, Marley Spoon recently completed a $16.6 million capital raising in order to strengthen its balance sheet and fund continued global expansion.

Global market research company Nielsen estimates that meal kits in Australia are worth over $300 million in annual sales and growing at a rate of 40% compared to 2018. The data suggests that meal kits account for less than 1% of the food and grocery market, but the sector is expected to continue to grow. In my view, Marley Spoon is well poised to take advantage of changing consumer behaviours.

Is it too late to buy shares in Marley Spoon?

In my opinion, yes, it is too late. For all I know, the company’s share price could surge another 800%, however, given the recent price action I think more upside would be unsustainable in the short term.

With the coronavirus pandemic increasing the value of online and convenience services, Marley Spoon is well positioned to benefit. However, it will be interesting to see how or if grocery shopping habits change when life returns to normal.

A prudent strategy would be to wait until the August reporting season to see how Marley Spoon has harnessed this momentum and what the company’s future growth profile looks like.

More reading

• Why NEXTDC and these high flying ASX shares just hit record highs
• Here are 3 ASX COVID-19 success stories
• How I’d build a $100,000 portfolio with ASX growth shares
• The Marley Spoon share price is up 588% in 2020. Will it keep delivering?
• Why ResMed and these ASX shares have just hit new highs

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX fintech shares initially saw their values fall with the onset of COVID-19 as fears around the economic impacts of the pandemic weighed heavily on investors. Online lenders were forced to take action to protect the quality of their loan books. Payment solution providers saw demand for some products drop. But some ASX fintech companies have fought back with new products and innovative takes on conservative lending models. On that note, let’s look at how 3 ASX fintech shares are tackling COVID-19 head on. 

EML Payments Ltd (ASX: EML) 

The EML Payments share price has recovered strongly since the March market meltdown, gaining more than 160% since its $1.34 low. Currently trading at $3.52, the EML share price has yet to regain its February highs of above $5. EML provides payment solutions for payouts, gifts, rewards, incentives, and supplier payments. 

Impact of COVID-19

COVID-19 had a significant impact on EML, with mall closures negatively affecting shopping centre gift card sales. This led EML Payments to suspend revenue guidance. The company advised it was difficult to predict how weaker economic conditions would ultimately impact on gift card sales. In March 2020, EML’s Gifts & Incentives segment saw gross debit volume (GDV) fall 29% on the prior corresponding period. In April, GDV fell 53% to $31.4 million, compared to $66.5 million in the prior corresponding period.

Longer term outlook 

EML expects COVID-19 to accelerate the move towards digital payments. Longer term, this is likely to benefit EML. Since the beginning of the year, the company has launched several new products and entered into new client contracts to drive its expansion. For example, EML’s ControlPay solution enables companies to facilitate finance to consumers via a digital card on a mobile device. This allows the credit provider to make real time credit decisions on a transaction-by-transaction basis. EML assumes no credit risk on these transactions. 

The company has signed contracts for the use of ControlPay with 3 companies in the neo-lending space, with programs expected to be live by early FY21. The solution is also being utlised in the buy now, pay later (BNPL) sector, with EML launching a pilot program with Zip Co Ltd (ASX: Z1P). The company also has approval to launch in Europe with BNPL provider Scalapay, and in North America with Sezzle Inc (ASX: SZL). 

Wisr Ltd (ASX: WZR)

The Wisr share price is up a whopping 250% from its low of 7 cents in March. Now trading at 24.5 cents, the share price has yet to regain its February highs of above 30 cents. The recent rise in the Wisr share price saw the company join the All Ordinaries (INDEXASX: XAO) in the most recent quarterly rebalance. Wisr is an online lender with the vision of enhancing customer financial wellness through an ecosystem of products that allow for low cost customer acquisition. 

Loan origination levels spike 

Last month, Wisr announced that its loan origination levels spiked in May, delivering 48% growth on April. The company delivered a total of $23.1 million in new loans across April and May. Deliberate steps were taken to tighten the company’s credit policy and moderate loan originations in response to COVID-19 disruptions. Growth in May saw loan originations return to pre-COVID levels, despite maintaining the significantly tighter credit policy introduced in March. A new record in total weekly settled loan volumes was also set even with the whole company working from home. 

CEO Anthony Nantes said, “In May, we achieved the milestone of the highest weekly settled loan volume in the Company’s history and have now surpassed pre-COVID-19 origination levels. This is an exceptional validation of our fintech business model, proprietary technology, and high-performance culture”.  

Quality loan book 

Wisr’s loan book is of prime quality, with an average credit score of 712 (above the Australian average score of ~600). At the end of May, 6.7% of total loan portfolio balances were on COVID-related payment deferrals. These loan deferral rates compare favourably to industry-wide deferral rates for residential mortgages (10%) and SME business loans (14%). The impact of heightened customer hardship stemming from COVID-19 is expected to be very manageable given Wisr’s solid balance sheet and low exposure to high-risk sectors. 

Money3 Corporation Limited (ASX: MNY) 

The Money3 share price has climbed nearly 110% from its March low of 81 cents. Currently trading at $1.69, the Money3 share price remains well below its high of over $3 in February. Money3 provides personal and car loans in Australia and New Zealand. Around 1 in 500 registered vehicles in Australia have a loan with Money3. 

Strong pre-COVID results 

Money3 reported strong results in the year to March 2020, with revenue up 44% to $93.3 million. EBITDA grew 43.6% to $44.4 million with NPAT increasing 49.2% to $22.9 million. The gross loan book was valued at $443 million at the end of March. The introduction of stage 3 restrictions, however, reduced demand for automotive finance in Australia. Stage 4 restrictions saw the New Zealand market close although customers continued to seek loan pre-approvals during lockdown.

Lending continues 

The company continues to make new loans to customers with stable incomes. Movements in arrears have been immaterial, both in Australia and New Zealand, and comfortably within internal receivables targets. Government stimulus is expected to positively impact customers’ ability to make payments on their loans. New loan originations continue, albeit with prudence to unaffected industries. Money3’s loan book has low leverage and is predominantly funded by equity. 

Future growth 

Money3 reports it is in a strong financial position with a cash balance of $43 million at the end of April. Last month, Money3 extended its debt facility agreement by one year to 15 December 2021. The interest rate on the facility will also be reduced by 100 basis points effective from 15 December 2020. The company has been lending conservatively throughout the pandemic. Money3 says it is well-positioned to make opportunistic acquisitions and originate new organic growth when demand returns. 

Foolish takeaway

The economic downturn will inevitably have an impact on online lenders and payment providers. But these ASX fintech shares are taking action to minimise downsides and maximise opportunities as growth returns. 

More reading

• Sezzle share price halted as it undertakes $86.3 million capital raising
• Zip share price surges 30% in a week. Are we calling bubble yet?
• Why the Sezzle share price rocketed 32% higher today
• 2 ASX shares that could flourish in an Australian recession
• Top brokers name 3 ASX shares to buy right now

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Emerchants Limited. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In a virtual meeting held on Thursday afternoon, prime minister Scott Morrison and his Japanese counterpart Shinzō Abe discussed further strengthening the defence and security relationship between Australia and Japan. Officials from both countries have also signed a new agreement between the two countries’ space agencies to work together on space science, research and education.

Both Australia and Japan have a well developed defence contracting sector. Therefore, I think it will be the more innovative companies in the sector that will benefit from this strengthened relationship. That is, companies with one-of-a-kind technology. Here’s a closer look at 3 ASX shares that fit the bill.

Space technology

Electro Optic Systems Hldg Ltd (ASX: EOS) is one of Australia’s leading defence companies formed in 1983 from the privatisation of Commonwealth of Australia space activity. Its products are based on proprietary sensor technology. 

The company is continually developing technology to help with over 500,000 pieces of space debris travelling at around 30,000 km per hour. This represents a serious threat to satellites, the international space station and more.

In this area, Electro Optic has an Australian-based space situational awareness (SSA) network. This monitors and tracks orbiting space-based objects. For instance, satellites and debris, using ground-based radar and optical stations.

The company also uses its sensors in the development of vehicle mounted, battle tested, remote weapons stations. Consequently, last Friday, Electro Optic Systems announced that it was in negotiations with the Commonwealth Government for 251 remote weapons stations (RWS) to be purchased over 12 months.

Artificial intelligence

Brainchip Holdings Ltd (ASX: BRN) is a company working in artificial intelligence (AI). It was started by a 40-year pioneer in information technology, a professional who is still with the company as its chief technology officer. The company already has successful AI products and is currently working on a first-of-its-kind technology, a neuromorphic system-on-a-chip.

Neuromorphic systems are large-scale systems of integrated circuits. Therefore, as the name implies, they mimic the human nervous system. Neuromorphic computing is considered the 5th generation of artificial intelligence by the Artificial Intelligence Board of America. 

The company has existing products used across defence and security already. It is a leading provider of security software to the casino industry for a range of security applications such as currency identification, player behaviour patterns, and game table operations.

Major airports use the product for facial recognition of terrorist suspects. In addition, unnamed European police departments have deployed the product in subways to search for known criminals. 

With the new product in advanced stages of development, the potential for further application of a system that learns for itself is very broad.

Advanced composite materials

Xtek Ltd (ASX: XTE) is a company with a patented technology called XTclave for curing and consolidating composite materials. The company has already installed an industrial sized machine in their Adelaide premises. This is large enough to support ~$40 million in revenues per year, and Xtek is also looking to install another one at its recently acquired US base.

Xtek’s technology manufactures high-quality void-free, precision ballistic and structural composite solutions. This includes, armour, lightweight tactical and human carriage equipment, robotic mechanical systems and unmanned craft.

For instance, the company is the primary provider to the Australian Department of Defence for portable X-ray equipment, demolition remote firing systems, and explosive ordinance robots. Furthermore, it sells the Xtek Tac2 Sniper Rifle as well as small unmanned aerial systems (SUAS). Agencies of the US Department of Defense and allied military services use the latter.

Finally, the company also manufactures a range of ballistic armour, which is up to 30% lighter than current benchmarks due to the company’s patented technology.

Foolish takeaway

The Australian defence sector is large and includes other great companies like Austal Limited (ASX: ASB), Quickstep Holdings Limited (ASX: QHL), and Bisalloy Steel Group Limited (ASX: BIS).

However, in the case of closer Australia and Japan ties, I think those companies offering a hard to replicate capability are more likely to see early success. 

Moreover, all of the companies mentioned also have either direct applications, or potential applications, in space exploration. 

More reading

• 3 ASX shares for the $270 billion defence plan
• Xtek share price rises 11% on FY20 revenue guidance
• 3 innovative ASX shares to buy
• Why Electro Optic Systems, Mayne Pharma, Tyro, & WAM Leaders are racing higher
• EOS share price on watch following defence spending talks

Daryl Mather owns shares of Austal Limited and Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited and Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Sezzle Inc (ASX: SZL) share price won’t be going anywhere on Friday and will remain in a trading halt.

Why is the Sezzle share price in a trading halt?

Sezzle shares have been placed into a trading halt while it takes advantage of a sharp rise in its share price to undertake a capital raising.

According to the release, the buy now pay later platform provider is aiming to raise approximately $86.3 million (US$60 million) to accelerate its growth strategy and strengthen its balance sheet.

Sezzle’s capital raising comprises a fully underwritten institutional placement to raise $79.1 million US$55 million and a non-underwritten share purchase plan (SPP) that aims to raise approximately $7.2 million (US$5 million).

The Afterpay Ltd (ASX: APT) rival advised that the pricing of the placement will be determined via a bookbuild process with an underwritten floor price of $5.00 per share.

This floor price represents a sizeable 28.1% discount to the last traded price of $6.95. It is also a 10% discount to its five-day volume weighted average price of $5.56 on 9 July 2020.

The company’s Executive Chairman and CEO, Charlie Youakim, commented: “Our strong 1H20 performance, improving consumer profile, and confidence in reaching an annualized run rate for UMS of US$1 billion (A$1.4 billion) by the end of 2020 allows us to be uniquely positioned to further expand through a number of near-term growth initiatives. Importantly, this capital raising will give us the ability to invest in these initiatives as well as fortify our balance sheet.”

How will the money be spent?

Sezzle revealed that its key priorities for the funds include investments in sales and marketing and product enhancement.

It also has its eyes on international expansion opportunities and plans to use the funds to support further market development in Canada and low cost testing in other markets.

More reading

• These ASX fintech shares are tackling COVID-19 head on
• Zip share price surges 30% in a week. Are we calling bubble yet?
• Why the Sezzle share price rocketed 32% higher today
• 2 ASX shares that could flourish in an Australian recession
• Top brokers name 3 ASX shares to buy right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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